1.1 Seeing it rises from Zhulou, and seeing it collapses.
In fact, Luna’s problem is only about one word: “liquidity”.
As a volatile asset with insufficient liquidity, Luna can mint UST at a 1:1 equivalent value, and obtain the legal currency liquidity that only Stablecoin deserves with the help of EX such as Curve. From this day on, it was doomed to die. And 20% APR is a total acceleration button.
2.1 Let’s talk about the reasons first, the fuse – UST’s big players left.
On May 8th, the enthusiastic Terra was preparing for the 4pool (the new pool on the Curve) known as “Ending the Curve War”, temporarily withdrawing the liquidity of the old pool. But the 8400w UST may be a misjudgment or a sniper. It directly smashed the market price of UST in Curve, and suddenly smashed the unprepared UST off its anchor.
2.2 Fermentation – Terra’s bug rescue PR.
I’ve said before that faith relies on faith. If confidence is lost, it is the beginning of a doom.
After breaking off the anchor, in fact, you should continue to fight chicken blood and drink chicken soup, and it will be an understatement.
But Terra has been doing reverse PR: we are saving the market! We’re going to hold this anchor.
It’s bad and transmits negative confidence: you say you’re healthy, so why see a doctor?
2.3 External conditions – poor market
Under the influence of US institutions, BTC is highly linked with US stocks. Affected by interest rate hikes and shrinking balance sheets, the performance of U.S. stocks has not been good, which in turn led to the continued slump of BTC. Unfortunately, LFG made the wrong decision at the wrong time. Since the average cost of LFG’s 10w BTC is around 4w, it can’t cut the meat at this time, and it needs money to save the market tray. LFG had to pledge BTC to the market maker to exchange fiat currency to support UST.
2.4 The situation deteriorates
However, BTC continues to fall, which makes LFG even more difficult. If UST continues to de-anchor, the newly mortgaged BTC will also have the risk of liquidation. So we see that LFG will soon transfer all the remaining BTC, maybe sell it, maybe keep the fruit, or more likely to make up the margin, which makes the situation completely worse.
Because, the just-established narrative of “the rise and fall of UST-BTC” has officially been shattered. This brought a new round of FUD that led to today’s situation.
3.1 What is the current predicament of DK?
In the absence of funds, it is impossible to fully protect the market, and he needs to make a difficult decision – whether to protect Luna or protect UST. Because there is not much ammo left, it is necessary to do everything possible to keep one.
3.2 Paul Luna
Then it is necessary to manually increase the price of the oracle machine (using the expected price), abandon the 1:1 just exchange mechanism, and instead maintain Luna’s premium to UST, in disguise to make UST burners retreat. You will know by burning UST. For example, the market price of Luna is 1.1, but the burning price is 1.3, and the arbitrage space is very small, which is why UST has not yet returned to the anchor.
But this will hit UST’s fundamentals (no longer stable) and it’s unlikely to pay a lifetime premium.
Burn UST for Luna
3.3 Guarantee UST
Then it is necessary to see the UST replaced by Luna and smashed, so that the anchor can be returned. But Luna has less than $1 left. The market value of Luna is only 1/5 of that of UST. Even if it is shattered, it will not be enough for UST holders to quit.
There is an English word that describes this very well: insolvent (free translation is insolvency), which is the end of every ponzi.
3.4 DK’s response
Maybe after careful consideration, on May 11th, DK finally wrote a short and concise thread, with only one sentence to the effect, still want to protect UST.
If I were DK, then I would turn off the cross-chain bridge and ask Jump and Binance’s UST to return to 1, which is very good for market confidence, and maybe a silver lining.
Tweet of DK
3.5 Breaking the Psychological Defense Line
However, after he posted this article, everyone also understood his intention: it seems to give up Luna.
Luna fell further, completely breaking everyone’s defenses, and everyone saw Luna at the beginning of 0. Binance even downgraded the precision of Luna contracts. You know, a month ago, it was still three digits, and now, it depends on three decimal places.
Ann of Binance
4.1 Deduction – Can UST really survive?
Liquidity is everything. This is also the subject of our thread.
Looking at the audience, although UST still has 0.8U at present, the liquidity of Curve is close to drying up to less than 2000w, and Terraswap and Astro still have 300w left. Binance, FTX’s UST and Luna may still look like tens of millions.
However, there are 13 billion UST wanting to run.
I have come into contact with many Luna farmers, most of them are extremely smart, and of course some are deceived, especially ordinary people/small and medium-sized companies in South Korea, not to mention for the time being. In any case, in today’s circumstances, it is the consensus of everyone to run.
However, the escape quota is less than 1%. UST seems to still have 0.8U, and many people fantasize about returning to the anchor. But the fact is cruel, only tens of millions of UST can enjoy the escape price of 0.8, while the remaining 10 billion+ billion is 0.
Thousands of words turned into one sentence: Not enough liquidity!
Without liquidity, any token is waste paper. This is the difference between a Ponzi and a real asset.
5.1 So what to do?
What if you try your best to keep one? The back is still out of ammunition.
I admire DK’s operational ability and charisma. But no matter how good a person is, he can’t defeat things beyond his ability, and he must rely on external forces.
I thought about it carefully, and there may be three final ways out.
5.2 Way out
Looking forward to the miraculous rebound of US stocks, BTC followed US stocks and quickly returned to 4w and then 5w, and the entire market re-entered Fomo.
However, under the expectation of raising interest rates and shrinking the balance sheet, such conditions are hardly met, and the possibility is very small.
5.3 Outlet 2
Convince Jump trading and count on the market maker to save his life. Other Luna investment institutions, such as 3AC and Binance, have made it clear that they want to stop losses, but the deeply bound Jump may save.
But the problem is: to save lives, at least a few billion dollars are needed. However, if billions of dollars are taken out, the currency price is saved, but everyone runs away, then the project seems to have no need to exist.
And, judging by the block, it appears that Luna’s financing plan failed.
5.4 Way out 3
As the name suggests, let it go.
For example, when Luna drops back to 0.01 and UST drops to 0.01, then with LFG’s current strength, there is hope for all of them to come back. But at what cost? I think everyone understands.
The last shock therapy program, such as Basis Cash, was once the third-generation stable king. You can look at the algorithm-guaranteed “USD Stablecoin” BAC, how much money is left now.
PS: It is worth pondering that Terra employees broke the news that DK is also an important participant in BAC.
6.1 Talk about something else.
I love Twitter, but my only complaint about the CT ethos is that a lot of people don’t tell you the risks behind this stuff, and instead use Few and NGMI to describe people who don’t embrace Ponzi.
What’s more, they like to embrace ponzi enthusiastically, tout ponzi to the sky, and try to smash it to the receiver after others come in, and complacently escape the top.
In the past two days, I went to Terra’s Discord (it seems that its Tele has been reported and cannot be joined), and I also listened to many tweets. Many foreigners have invested all their life-saving in Anchor, and now they are very helpless and painful, and they can even hear their faint crying when they speak.
Many people have been deceived, by DK, by Terra, by those who boasted of embracing Ponzi, and half-life savings have been turned into paper wealth without any liquidity.
I’m not a big KOL, I’m just a crypto researcher, and I manage a small crypto fund (@NothingResearch) with my partner, and the money in it is basically our own. I don’t take ads, I don’t take rebates, and as I said before, my idol is @ZachXBT, and he’s famous for debunking scams.
My conscience has driven me to write these words in the last six months. A lot of my friends hold luna, maybe my objection to luna is too much, I even feel that they are quite critical of me.
If you look through my twitter, for a long time, I was reluctant to mention Luna’s name directly for fear of getting scolded by Luna Holder. Of course, I don’t blame them. After all, I want to go to CX after buying crypto.
But I still want to say that when I meet Ponzi, I will still firmly point it out.
This is a matter of principle. Every time I save a person, I feel a little more psychologically at ease.
The above content is purely broken thoughts, comrades who are not interested, please ignore it.
7.1 Back to Luna
I don’t recommend going short with big capital at this point. The $1 Luna ends up heading for $0, but may briefly go back to $2 or $4. I also do not recommend repeated horizontal jumps and swings, because most people will only slowly return the principal to the exchange.
Maybe UST still has some room to fall, of course, its upside is not much, the highest is 1;
Maybe the ecological projects on the Terra chain such as $ANC will not have a better life. Refer to the current status of the Tianwang project on EOS;
Maybe DK can turn the tide once, but I’m afraid it will be the last time, and the odds of winning are really too low.
Finally, many friends are obsessed with algorithm Stablecoin, including me.
I think Shuanwen is the elf in the DeFi forest. It is so tempting that it may be close at hand, but it may not exist at all, but it has attracted countless followers.
But be careful, don’t gamble all your chips for a social experiment.
I’m still looking forward to the birth of a non-custodial, fully algorithmic Stablecoin – bringing elven light to a world that’s getting out of control.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/moonlight-that-cannot-be-anchored-terras-origin-predicament-deduction-and-way-out/
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